From South African Gold Mines to the Gold Symposium

It’s our last day here in Johannesburg before flying back to Sydney for the Gold Symposium. The entire trip has exceeded our expectations. We learned a lot more about the platinum and palladium markets. In fact the whole platinum group metals are suddenly a lot more interesting, for a variety of reasons.

But the full report will have to wait until we have more time. This morning, we scanned the headlines to see if anything earth shattering has been going on in Australia while we weren’t looking. There’s no shattering. But there’s a fair bit of rumbling.

The ASX/200 closed at 4571 on Friday. The index is up about 11% since the end of June. It was up over 7% in September. September is actually a worse month for shares than October, in historical terms.

Yet here we are, nearly done with October, and the market is cruising right along without a care in the world. There’s no worry that China’s 7% growth figure is a fraud, no anxiety about Spain’s budget dilemma, and not a whiff of fear that lower interest rates could reverse the capital flows supporting the Australian dollar.

Hmm. It’s a confusing old world. We’ll have to see what Lord Slipstream — our colleague Murray Dawes — has to say when we get back to Melbourne next week. For most of this year, Murray identified 4200 as the ‘point of control’ for the price action on the ASX/200. That 4200 level is like a centre of gravity which share prices always want to return to. We suspect the intermediate or short-term trend is higher than 4200. But we’ll have to see what Murray says later this week.

In the meantime, we’ll pack our bags and leave later today. We fly in Monday afternoon and speak at the Gold Symposium Tuesday afternoon. This trip will feature prominently in our remarks. In fact, our presentation will have a whole new appreciation for what it takes to mine gold.

On Friday, we suited up with our friends Byron King and Francois Joubert to descend 300 metres underground in a gold mine south west of Johannesburg. The gold mine is not back to full strength after the strikes. But there were no visible signs of unrest, although we did learn that two mineworkers had been murdered for going to work instead of striking.

The labour and political situations are complicated. We’ll just focus on the gold mining today. In a word: tough. It is tough to mine gold in South Africa. It is dark, wet, and alternately hot and cold in the mines. At the face of the reef in this particular mine, the workers were crouched in a panel about 1.5 metres high, using water powered drills to separate the ore from the rock face.

This was a shallow gold mine by South African standards. The deeper mines in the Witwatersrand Basin go down to three and four kilometeres. The temperature of the rocks at that depth is over 60 degrees Celsius. Those mines have to be cooled in order to be safely operated.

And when you see the reefs being mined, the gold trapped in the rock isn’t all that visible. It’s quite a contrast between the high-relief proof coins or bullion bars you see in a showroom. Your editor has a new appreciation for the skill, hard-work, and expertise it takes to extract resources from the Earth.

However a more detailed admiration for South Africa, platinum, palladium, and gold will have to wait until we’re back in Australia. Both the Dow Jones Industrials and the S&P 500 were down on Friday over one percent. Expect something like that in Australia. Tomorrow, we’ll show why we think this pleasant little bullish status quo can’t possibly last. Until then…

Dan Denning is the Editor-in-Chief of The Daily Reckoning Australia and the author of 2005’s best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 as a small-cap analyst. From 2000 to 2005 he was the managing editor of Strategic Investment, where he recommended gold and warned of the US housing bubble. Dan has covered financial markets from Baltimore, Paris, London and, beginning in 2005, Melbourne Australia, where he is the Publisher of Port Phillip Publishing.
To follow Dan's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.